The loss of U.S. leadership in the worldwide fight against corruption coincides with an exponential growth in bribery and kickbacks that now siphon $2 trillion year from the world economy—money that could have otherwise been used to protect against infectious diseases like COVID-19, according to the Center for Strategic and International Studies (CSIS).

Measures taken since Trump’s 2016 election, including the repeal of a law requiring U.S. oil, gas and mineral companies to disclose all payments to foreign governments, represented a setback to the bipartisan commitment to global financial transparency, the report said.

“Anti-corruption efforts have the potential to support both U.S. economic and national security interests, but the Trump administration’s actions have undercut past bipartisan efforts,” said CSIS, a Washington, D.C.-based foreign policy think tank.

In 1977, Congress passed the Foreign and Corrupt Practices Act—making the U.S. the first nation to enact tough penalties on domestic companies caught bribing overseas officials.

Even though skeptics argued corruption was an ineradicable feature of the global economy, the U.S. continued to be a trailblazer in supporting measures aimed at widening financial transparency and accountability.

As the most powerful and influential stakeholder in the World Bank, it helped lead efforts to root out institutional corruption. The U.S. also provided behind-the-scenes influence in international conventions against bribery established by the United Nations and the Organization for Economic Cooperation and Development.

A provision in the 2010 Dodd-Frank Act, passed in the wake of the financial meltdown, required all publicly listed resource companies to disclose payments to the U.S. and foreign governments.

The same year, the Trump administration withdrew from the international Extractive Industries Transparency Initiative, which committed all signatories to disclose revenue from their oil, gas, and mining sectors.

Damaging U.S. Credibility

The repeal of the provision and similar moves was “damaging [to] the United States’ credibility as a leader on corruption,” CSIS said.

In 2011, the U.S. was a prime mover behind the establishment of the Open Government Partnership (OGP) aimed at increasing government responsiveness. Its membership has since increased to 79 countries.

But most of its early advantage has now been squandered,

“U.S. diplomatic support for OGP has been visibly absent under the Trump administration, and many countries have failed to turn [their] commitments into action,” CSIS said.

Corruption drains money that could have otherwise gone into state treasuries as tax revenue to pay for social services like education and health care. The loss of that revenue has contributed to the vulnerability of many developing countries to infectious diseases, the report said.

“The money saved from eliminating corruption and improving tax collection systems could be used to…. address the negative health, economic, and social consequences of Covid-19,” said CSIS.

The CSIS study is the latest in a long list of critiques claiming that the Trump government’s antipathy to traditional templates for international collaboration has endangered the security and well-being of American citizens.

“The United States should recapture its leadership on global anti-corruption efforts for a number of reasons, but most critically for economic ones,” CSIS said.

“Reducing corruption and improving governance in developing countries opens up markets for U.S. products and levels the playing field for U.S. companies operating abroad. Economic growth in developing countries reduces unemployment, increases stability, and supports U.S. national security interests in the process.”

Ceding Victory to China

But by backing away from its support for stricter anti-corruption measures, the U.S. effectively was ceding victory to Russia and China—its two principal geopolitical rivals—who have little compunction about paying huge bribes to government officials in countries where they seek a commercial foothold.

The report cited the example of a former Hong Kong minister named Chi Ping Patrick Ho.

Working on behalf of a Chinese energy company, Ho tried to bribe the president of Chad and the foreign minister of Uganda in exchange for oil rights. At one point, he met with the Chad president in the middle of the Sahara Desert and offered him $2 million.

Ho was arrested in the U.S. in 2017.

Most high-level corruption is hidden in intricate financial arrangements that are ignored (for a bribe) by regulators or senior officials. It can range from a failure to pay taxes to illicit financial flows or money-laundered cash to offshore banks.

According to a World Bank survey cited by CSIS, 12.3 percent of 158,000 firms surveyed around the world admitted they were expected to give “gifts” when they met with tax officials.

The annual global corruption figure of $2 trillion cited by CSIS is based on an estimate by the World Economic Forum.

“If the amount of money lost to corruption was counted as a country’s gross domestic product, it would be the tenth-largest economy in the world,” CSIS said.

CSIS laid out a series of recommendations that it said would help the U.S. “recapture” global leadership in battling corruption. They included:

Aid to developing countries for training in open public procurement processes.

Support for freedom of information laws to “empower journalists and citizens to hold governments accountable”;

Provide assistance in developing online technology to make governments more transparent.

Reducing corruption was also critical to combating extremism and civil conflict in nations where the enrichment of top government officials has exacerbated inequality and a lack of trust in government, said the study.

“The lack of trust prevents countries from adequately providing government services…. increases instability, and the likelihood of coup attempts, and leads to a rise in extremism,” the study said.

The report was written by David E. Runde, a senior vice president of CSIS and director of the organization’s Project on Prosperity and Development; and Christopher Metzger, a CSIS research associate.

]]>https://thecrimereport.org/2020/04/29/trump-undercut-u-s-leadership-in-fighting-global-corruption-report/feed/0Mexican Cartels Exploit Pandemic to Boost ‘Leverage’https://thecrimereport.org/2020/04/21/mexican-cartels-exploit-pandemic-to-boost-leverage/
https://thecrimereport.org/2020/04/21/mexican-cartels-exploit-pandemic-to-boost-leverage/#respondTue, 21 Apr 2020 15:24:35 +0000https://thecrimereport.org/?p=912620As Mexico braces for a peak number of infections expected in May, criminal groups have been spotted handing out “aid packages” in multiple neighborhoods to families in need.

Locals say these criminal groups are doing the work that the Mexican government won’t, while others — like the Mexican President Andres Manuel Lopez Obrador — argue that the groups are simply “positioning themselves to leverage the pandemic for their own ends,” according to The Guardian.

The aid packages which criminal groups are handing out are meant to help cash-strapped residents safely ride out the coronavirus pandemic. The packages typically include cleaning supplies, cooking oil, rice, canned beans, and sugar, among other various necessities, according to Reuters.

On Monday, criminal organizations were posting videos on social media that show heavily armed members giving out packages with toilet paper and shampoo to a crowd of mainly older women.

Off-screen in one of the videos, someone recording the footage for social media announces that the aid packages come from a local crime boss “who runs things here”, in the city of Apatzingán in Mexico’s western state of Michoacán.

In Guadalajara, Mexico’s second-biggest city, Alejandrina Guzman, a daughter of jailed drug lord Joaquin “El Chapo” Guzman was among those seen by reporters “handing out the packages stamped with her own company’s ‘El Chapo 701’ logo, which includes the image of her infamous father,” Reuters and The New York Post report.

After some of those videos went viral, President Andres Manuel Lopez Obrador held a news conference on Monday telling the criminal groups and gangs to “behave better” and said that their charity work is not helpful, according to Reuters.

“These criminal organizations that have been seen distributing the packages; this isn’t helpful. What helps is them stopping their bad deeds,” López Obrador told reporters at a news conference.

López Obrador directed his message to the nearly 200 criminal groups that are active in Mexico. He called for the violence to stop, specifically homicides.

In 2019, 34,582 homicides were recorded, “making it the bloodiest year in the country since modern record-keeping began in the 1990s,” The Guardian details.

Vanda Felbab-Brown, a senior fellow at the Brookings Institution, believes these good deeds carried out by the criminal organizations do not come from a place of altruism.

“Law enforcement assets in Mexico will focus on Covid-19-related lockdowns, and criminal groups are clearly using the economic downturn and lockdowns to build up political capital,” Felbab-Brown told The Guardian.

It is known that many of these criminal organizations cast a heavy and dark shadow over the communities they rule over, particularly “exerting a heavy toll on businesses and civilians at large through extortion, kidnapping, and violence,” The Guardian explained.

It’s a moral dilemma because, at the same time, if citizens side with the criminal organizations, gang members will act as their guardians and protectors.

“It isn’t like any of them are good people,” one Michoacán resident told The Guardian reporters, “But the truth is we can’t expect much from anybody else. At least we know [the local armed group], so they are in some way the least bad solution.”

The long term impact that the coronavirus pandemic will have on organized crime and communities in Mexico depends largely on how long the pandemic will last, The Guardian explains.

“Everybody out there is worried right now,” Mexican lawyer Jalisco Cartel told The Guardian. Cartel also explained that the economic fallout worries many of the organized crime groups, too.

He continued, “Maritime shipping is down, and [crime groups] are having problems getting their hands on precursor drugs [for methamphetamine and fentanyl], and fewer commercial flights from Colombia means less cocaine is coming through.”

“For now, the shock is temporary. But if they get squeezed for longer, many will turn to alternatives [such as] extortion and kidnapping.” Cartel explained, adding that some criminal organizations have already stopped paying their members.

]]>https://thecrimereport.org/2020/04/21/mexican-cartels-exploit-pandemic-to-boost-leverage/feed/014 Current, Former VA Officials Indicted in Fraudhttps://thecrimereport.org/2019/09/25/14-current-former-va-officials-indicted-in-fraud/
https://thecrimereport.org/2019/09/25/14-current-former-va-officials-indicted-in-fraud/#respondWed, 25 Sep 2019 06:26:15 +0000https://thecrimereport.org/?p=660440Before $21 million allegedly went missing, before the sheriff put his gun in his mouth and fired, before Tuesday’s announcement that the entire top tier of the Warren County, Va., government was indicted, there was a dream of renewal for Front Royal, Va., a town 70 miles from Washington, D.C., that fell on hard times after a rayon manufacturing plant closed in 1989, leaving 1,300 people jobless and 440 acres of toxic waste, the Washington Post reports. In 2014, with the land cleaned up and Front Royal increasingly attractive to tourists and ex-city dwellers, officials announced plans for a data center and retail complex that would bring 600 jobs and bring in other projects.

The deal was brokered by Jennifer McDonald, who directed the Warren County economic development authority. Developer Truc “Curt” Tran pledged to finance it with $40 million from wealthy immigrant investors and a $140 million federal contract his technology company had secured. Tran would fund a police training academy overseen by Sheriff Daniel McEathron. Those may have been lies. Tran never had the money to build the data center on the 30 acres his company bought from McDonald’s agency for $1, a lawsuit alleges. The training academy was one of several hoaxes that, prosecutors and civil lawsuits claim, allowed Tran, McDonald, McEathron and others to siphon millions in public funds, which they allegedly used to buy properties, pay bills and gambling debts, and enrich relatives and friends. McEathron is dead, Tran was sued by the economic development authority and state and federal investigations are under way. McDonald faces 28 state counts of embezzlement, money laundering and obtaining money through false pretenses. On Tuesday, the Virginia State Police announced that 14 current and former local officials were charged with misdemeanor misfeasance and nonfeasance.

]]>https://thecrimereport.org/2019/09/25/14-current-former-va-officials-indicted-in-fraud/feed/0Feds Indict Trump Critic Avenatti With 36 Counts of Fraudhttps://thecrimereport.org/2019/04/12/aveneatti-indicted-on-36-counts/
https://thecrimereport.org/2019/04/12/aveneatti-indicted-on-36-counts/#respondFri, 12 Apr 2019 09:00:29 +0000https://thecrimereport.org/?p=508556Federal prosecutors in California announced on Thursday three dozen charges against Michael Avenatti, the prominent attorney best known for his criticisms of President Trump, accusing the lawyer of stealing millions of dollars from his clients and funneling their money into his own interests, including co-ownership of a $5 million private jet, The Washington Post reports.

The indictment was sweeping in its scope, accusing Avenatti of defrauding clients over a period spanning more than four years. The charges included bleak details, such as claims that Avenatti’s alleged actions caused a paraplegic client to lose his Supplemental Security Income benefits, which are paid to adults and children with disabilities, and prevented the same client from using settlement money to buy a home. Avenatti denied wrongdoing and wrote on Twitter that he will “fully fight all charges and plead NOT GUILTY.” The California case against him is separate from the federal case in New York accusing Avenatti of trying to extort Nike, the sports apparel behemoth.

]]>https://thecrimereport.org/2019/04/12/aveneatti-indicted-on-36-counts/feed/0Ex-Obama White House Counsel Expects Indictmenthttps://thecrimereport.org/2019/04/11/ex-obama-white-house-counsel-expects-indictment-for-work-with-manafort/
https://thecrimereport.org/2019/04/11/ex-obama-white-house-counsel-expects-indictment-for-work-with-manafort/#respondThu, 11 Apr 2019 08:30:07 +0000https://thecrimereport.org/?p=508381Attorneys for former White House Counsel Gregory B. Craig said Wednesday that he expects to face federal charges in the coming days in relationship to legal work he did for the Ukrainian government in 2012, The Washington Post reports.

The expected indictment — which his attorneys called “a misguided abuse of prosecutorial discretion” — stems from work Craig did with GOP lobbyist Paul Manafort on behalf of the Ukrainian Ministry of Justice in 2012. At the time, Craig was a partner at Skadden, Arps, Slate, Meagher & Flom, the law firm he joined after ending his tenure as White House counsel for President Barack Obama. Manafort, the former campaign chairman to President Trump, pleaded guilty last year to charges related to his Ukraine lobbying. Craig resigned from Skadden in April 2018 amid a building investigation into whether the firm’s lawyers failed to register as foreign lobbyists for their Ukraine engagement. Prosecutors have been investigating whether Craig issued false statements to the Justice Department in 2013 as officials made inquiries to the firm about whether its work required public registration, people familiar with the case said, speaking on the condition of anonymity to describe the ongoing probe.

]]>https://thecrimereport.org/2019/04/11/ex-obama-white-house-counsel-expects-indictment-for-work-with-manafort/feed/0Trump Calls New House Investigation ‘Stone Cold Crazy’https://thecrimereport.org/2019/03/05/trump-calls-new-house-investigation-stone-cold-crazy/
https://thecrimereport.org/2019/03/05/trump-calls-new-house-investigation-stone-cold-crazy/#respondTue, 05 Mar 2019 08:51:37 +0000https://thecrimereport.org/?p=485293House Democrats launched a sweeping new probe of President Trump, an aggressive investigation that threatens to shadow the president through the 2020 election season with potentially damaging inquiries into his White House, campaign and family businesses, reports the Associated Press. House Judiciary Committee Chairman Jerrold Nadler said Monday his panel probing possible obstruction of justice, corruption and abuse of power is sending document requests to 81 people linked to the president and his associates. The investigation could be setting the stage for an impeachment effort, although Democratic leaders have pledged to investigate all avenues and review special counsel Robert Mueller’s upcoming report before trying any drastic action.

Trump denounced the probe Tuesday, tweeting that Democrats “have gone stone cold CRAZY. 81 letter sent to innocent people to harass them. They won’t get ANYTHING done for our Country!” Nadler said the document requests, with responses to most due by March 18, are a way to “begin building the public record.” White House press secretary Sarah Sanders called the House probe “a disgraceful and abusive investigation into tired, false allegations.” Three other House Democratic chairmen announced a separate investigation to obtain information about private conversations between Trump and Russian President Vladimir Putin.

]]>https://thecrimereport.org/2019/03/05/trump-calls-new-house-investigation-stone-cold-crazy/feed/0Michael Cohen’s Prison Sentence Delayed, Public Hearing Scheduledhttps://thecrimereport.org/2019/02/21/michael-cohens-prison-sentence-delayed-public-hearing-scheduled/
https://thecrimereport.org/2019/02/21/michael-cohens-prison-sentence-delayed-public-hearing-scheduled/#respondThu, 21 Feb 2019 09:45:42 +0000https://thecrimereport.org/?p=477480U.S. District Court Judge William Pauley agreed Wednesday to a request from Michael Cohen’s attorney to allow his client to report to prison as late as May 6, rather than on March 6 as Pauley had ordered, Politico reports. Last December, the Pauley sentenced Cohen to three years in prison after his guilty plea to a variety of fraud charges as well as charges that he conspired to arrange illegal donations to Trump’s 2016 presidential campaign in the form of unreported payments to women claiming to have had sexual affairs with the candidate.

Pauley provided no detailed explanation for his order delaying Cohen’s reporting date, but the letter from Cohen’s attorney Michael Monico cited health issues and congressional testimony as grounds for the postponement. Cohen will appear before the House Oversight Committee for a public hearing on Feb. 27, Chairman Elijah Cummings announced Wednesday.

]]>https://thecrimereport.org/2019/02/21/michael-cohens-prison-sentence-delayed-public-hearing-scheduled/feed/0Did NRA Provide Illegal Donations to Trump Campaign?https://thecrimereport.org/2019/02/08/probe-into-whether-nra-chief-engaged-in-illegal-campaign-coordination/
https://thecrimereport.org/2019/02/08/probe-into-whether-nra-chief-engaged-in-illegal-campaign-coordination/#respondFri, 08 Feb 2019 12:15:57 +0000https://thecrimereport.org/?p=469077A joint congressional inquiry is demanding that National Rifle Association executive vice president Wayne LaPierre hand over internal documents showing whether the NRA made “illegal, excessive, and unreported in-kind donations” to the campaigns of Donald Trump and several GOP Senate candidates, The Trace reports. The probe is based on a series of investigative reports published by The Trace laying out evidence that the NRA and its vendors used apparent shell companies to evade rules prohibiting coordination between outside groups and the campaigns they support.

The probe is being led by Senator Sheldon Whitehouse, Democrat of Rhode Island, and Representative Jamie Raskin, Democrat of Maryland. “The evidence shows the NRA is moving money through a complex web of shell organizations to avoid campaign finance rules and boost candidates willing to carry their water,” Whitehouse told The Trace. “And if the NRA can weave such a web, so can Vladimir Putin and others trying to undermine our democracy. We need the truth about this scheme or else special interests like the gun lobby or foreign interests like Russia can flaunt the law and erode the integrity of our elections.”

]]>https://thecrimereport.org/2019/02/08/probe-into-whether-nra-chief-engaged-in-illegal-campaign-coordination/feed/0Accused Russian Spy Maria Butina, in Solitary, Called Victim of Psychological ‘Torture’https://thecrimereport.org/2018/11/28/accused-russian-spy-maria-butina-now-in-solitary-called-victim-of-psychological-pressure/
https://thecrimereport.org/2018/11/28/accused-russian-spy-maria-butina-now-in-solitary-called-victim-of-psychological-pressure/#respondWed, 28 Nov 2018 13:15:12 +0000https://thecrimereport.org/?p=426015The accused Russian spy who is one of the most intriguing figures in the investigation into President Trump’s election campaign has landed in solitary confinement for the second time, and her supporters back home claim the U.S. government is creating “conditions of torture” to ramp up “psychological pressure” on her.

But authorities at the Alexandria, Va., detention facility where she has been housed counter that Maria Butina was moved into administrative segregation for her own “safety.”

Butina, who faces charges of conspiring to act as a foreign agent, has been imprisoned since her arrest July 16, after she was judged a flight risk by authorities. According to prosecutors, she was working for Russian intelligence as part of a stealth mission to subvert the 2016 election.

The Siberian-born Butina, who celebrated her 30th birthday in jail, has pleaded not guilty to the charges, and officials, family and supporters in her native land are eagerly using the latest wrinkle in her case to generate sympathy.

“She is not allowed to take a walk during the day, only between 2 and 4 in the morning,” Ivan Melnikov, vice president of the Russian division of the United Nations Human Rights Committee, told the Russian news service Interfax.

“It is unacceptable from the human rights standpoint,” Melnikov said in a report translated and posted by Johnson’s Russia List, a listserv of news from Russia supported by George Washington University. “At night, a human being should be asleep.”

Placing her in solitary, he said, “constitutes the creation of conditions of torture to exert psychological pressure.”

When she was first jailed, Butina was confined briefly to a solitary cell in a Washington, DC, detention center for 22 hours a day, and later released into the general population.

According to her lawyer, who filed a petition for her release this week, she was moved into solitary a second time by Virginia prison authorities after she gave a fellow inmate the name and phone number of her lawyers.

Attorney Robert Driscoll said he was told the decision was made “for her safety,” CNN.com reported.

Prison authorities have so far not commented on her case.

A photo of Maria Butina before she was jailed. Photo via Wikipedia.

Butina, a former American University graduate student, developed close friendships with leading conservative activists who in turn reportedly put her in contact with major players in both the Republican Party and the National Rifle Association.

But her compatriots, who believe she is a scapegoat in U.S. partisan wrangling, are trying to turn her into a heroine.

A sympathetic report in the Russian newspaper Izvestia this week, headlined “Despite tough prison conditions, Butina stays strong,” painted her as a “hostage to big politics.”

“Maria is being held hostage to big politics,” Alexander Domin, a Moscow law professor described as a personal friend, told the paper. “By arresting her, Washington is flaunting its power.

“The Russian Foreign Ministry now faces a serious task: to help our political prisoners return home.”

According to the Izvestia dispatch, Butina spent her time teaching yoga and algebra to her fellow inmates when she was housed in the general prison population, and even started to learn Italian.

“I heard that she and her fellow inmates even baked cookies,” her father Valery Butin was quoted as saying. “But it is difficult to imagine how hard it is when your daughter is jailed under spurious charges.

“I hope this nightmare will end soon and we will meet again.”

Butina faces years in prison if convicted.

]]>https://thecrimereport.org/2018/11/28/accused-russian-spy-maria-butina-now-in-solitary-called-victim-of-psychological-pressure/feed/0Did Slovak Police Foul Evidence in Journalist’s Murder?https://thecrimereport.org/2018/05/25/did-slovak-police-foul-evidence-in-journalists-murder/
https://thecrimereport.org/2018/05/25/did-slovak-police-foul-evidence-in-journalists-murder/#respondFri, 25 May 2018 10:13:15 +0000https://thecrimereport.org/?p=288809Slovak police may have inadvertently destroyed evidence through negligence at the scene of the murder of an investigative journalist in a case that prompted mass street protests and the prime minister’s resignation, reports Reuters. Journalist Jan Kuciak, who had written about political corruption in Slovakia, was found shot dead along with his girlfriend at their home in February. The Kuciak family’s lawyer, Daniel Lipsic, a former Slovak interior minister, said the two bodies had been moved without being examined by a forensic surgeon at the crime scene and this led to an incorrect initial pronouncement of the time of death. “I don’t understand why more experienced investigators from the National Crime Agency were not called immediately, and arrived at the crime scene hours after the district police,” Lipsic said.

“Some evidence was not secured immediately but was only discovered in photographs from the crime scene,” said Lipsic. “This is a serious dereliction of duty. We don’t know how much evidence may have been destroyed.” Pictures from the crime scene published by the Slovak media also show that National Crime Agency’s anti-corruption section chief, Robert Krajmer, who does not directly investigate murders, was also present. The murder case forced the resignations of veteran prime minister Robert Fico, his interior minister and Slovakia’s police chief. It also exacerbated worries about media freedom in ex-communist eastern Europe. No one has been charged with the murder, which a prosecutor has said was probably a contract killing.

]]>https://thecrimereport.org/2018/05/25/did-slovak-police-foul-evidence-in-journalists-murder/feed/0Long Island DA Indicted for Protecting Police Chiefhttps://thecrimereport.org/2017/10/26/long-island-da-indicted-for-protecting-police-chief/
https://thecrimereport.org/2017/10/26/long-island-da-indicted-for-protecting-police-chief/#respondThu, 26 Oct 2017 10:31:41 +0000https://livesite.qdoznr1-liquidwebsites.com/?p=207203Longtime Suffolk County, N.Y., District Attorney Thomas Spota and one of his chief aides have been indicted on federal charges that they were involved in a cover-up of former Suffolk Police Chief James Burke’s assault of a suspect in 2012, reports Newsday. Spota, a Democrat who was first elected as a corruption fighter, and his aide, Christopher McPartland, who runs the political corruption unit, pleaded not guilty Wednesday at a brief arraignment. Both were released on $500,000 bond. They showed no emotion before the packed courtroom.

Spota, McPartland, Burke and other members of the Suffolk County PD “had numerous meetings and telephone conversations wherein they discussed the assault,” the victim’s allegations against Burke, and the federal investigation, prosecutors said in a letter to the judge asking for strict bail conditions. They “agreed to conceal Burke’s role in the assault and to obstruct and attempt to obstruct the federal investigation in order to protect Burke,” prosecutors said in the letter. Acting U.S. Attorney Bridget M. Rohde said in the letter that Spota and McPartland have “demonstrated their utter contempt for the laws they were charged with upholding.” The cover-up concerned the assault by Burke on Christopher Loeb, who stole a duffel bag from the chief’s department SUV, parked in front of Burke’s home in December 2012. Burke, a longtime Spota protégé and close friend of McPartland, is serving a 46-month federal sentence for violating Loeb’s civil rights, then engaging in obstruction of justice by orchestrating a cover-up.

]]>https://thecrimereport.org/2017/10/26/long-island-da-indicted-for-protecting-police-chief/feed/0Who’s Policing Counterfeit Airplane Parts?https://thecrimereport.org/2017/09/20/faa-warned-boeing-777-737-ntsb-airplane-parts-china/
https://thecrimereport.org/2017/09/20/faa-warned-boeing-777-737-ntsb-airplane-parts-china/#commentsWed, 20 Sep 2017 15:28:38 +0000https://livesite.qdoznr1-liquidwebsites.com/?p=196569A tide of defective and possibly counterfeit airplane parts has been making its way into U.S. aircraft unreported and unchecked, according to senior aviation specialists and whistleblower attorneys.

Earlier this spring, a government audit of the Federal Aviation Administration (FAA)—the agency responsible for ensuring airline safety—said the FAA had consistently failed to alert federal law enforcement authorities about suspect parts installed in U.S. airplanes.

The audit by the Department of Transportation’s Office of the Inspector General (OIG)—the first one in 20 years—also rebuked the agency for closing investigations without ensuring that counterfeit and improperly manufactured parts (SUPs) were removed.

The FAA has since pledged to comply with the audit recommendations. But interviews with former FAA inspectors and other experts raise questions about whether federal law enforcement authorities can cope with the threat posed by an aviation parts manufacturing industry that has spread to emerging markets like China, where many of the fake or defective parts identified in investigations have originated.

The safety threat posed by fraudulent parts is likely to increase unless federal authorities become more aggressive in combating it, the experts told The Crime Report.

“We’re outsourcing so much work into those regions (that) the propensity for risk increases exponentially,” said Michael Dreikorn, a former FAA safety inspector who helped set up the agency’s first Suspected Unapproved Parts (SUP) program in the 1990s.

Some argue that an equally serious problem is a laissez-faire culture in which the agency effectively allows the commercial aviation industry to police itself.

Whenever the FAA suspects fraud, under its own guidelines, it is required to refer the case to federal law enforcement authorities.

“However, the FAA is loathe to actually refer people for criminal enforcement,” said Mary Schiavo, a former Inspector General of the Department of Transportation (DOT).“They just don’t do it.”

Agency officials respond that the FAA’s current oversight program assures the safety of the American flying public.

Hundreds of defective “single point of failure” parts from China were installed in Boeing 777 spoilers. Photo by Christian Junker via Flickr

“In rare instances where the FAA determines SUPs have entered the system, we issue corrective measures that mandate timely action by affected owners and operators,” the FAA said in an emailed response to The Crime Report’s questions.

The Trials of a Whistleblower

But a Crime Report investigation suggests that despite the sharp rebuke by the OIG earlier this year of FAA practices, attempts by a Chinese whistleblower to warn both authorities of a potential grave risk to the flying public continues to fall on deaf ears.

In 2016, a supply chain manager at Moog, a U.S. aerospace company that supplies flight control systems to Boeing, alerted the Federal Aviation Administration (FAA) that he had discovered a Chinese subcontractor was producing improperly manufactured parts.

According to an FAA report obtained by The Crime Report, the agency investigated, but found no evidence of a violation.

Unsatisfied, the whistleblower, Chaosheng Shi, asked for a re-investigation.

During the second investigation, the regional FAA inspector found evidence that improperly manufactured parts had been installed in commercial Boeing 777s around the globe. The same subcontractor, according to the report, had outsourced other critical parts to an unapproved supplier.

What’s more, the subcontractor had fabricated production records.

Under the FAA’s own guidelines, when the agency finds evidence of “suspected unapproved parts” (SUPs), it is supposed to refer them to federal law enforcement agencies for a full examination.

But that didn’t happen.

Instead, despite the evidence produced during the second investigation, the FAA concluded that “all corrective actions have been taken. No further action is required.”

‘Accounting Error’

Regarding Shi’s suspicion that the subcontractor was using substitute, sub-standard raw materials, FAA accepted the company’s explanation that it was an “accounting error.”

FAA’s investigation relied entirely on Moog’s internal probe into the suspected counterfeiting. But by the time Moog performed its inspection, claimed Shi, the parts that it tested were no longer representative of the batch that had been installed on aircraft a year earlier.

These parts are still in the air today, installed in wing flaps that control descent and speed for safe landing.

As if this weren’t chilling enough, they are what’s known in the industry as “single-point-of-failure” parts—meaning that if they fail, the whole system fails.

According to Shi, as many as 500 commercial airplanes could be affected.

The Moog case illustrates what some experts say is a worrying failure of oversight by the agency tasked with ensuring the safety of commercial airplanes in the U.S., as well as law enforcement agencies that investigate and prosecute unapproved parts fraud.

Experts say the relationship between the airline industry, the FAA, and congressional oversight committees has grown too cozy.

While people within the industry insist that manufacturers have a self-interest in keeping the flying public safe, veteran aviation experts are telling a different story—one in which unreported defective parts invade the supply chain unchecked, with no repercussions.

Critics such as Dreikorn cite a relationship between the airline industry, FAA, and congressional oversight committees that has grown too cozy.

Although it is not the FAA’s role to investigate criminal matters, the agency acts as a gatekeeper, deciding which cases are referred to law enforcement. For cases involving commercial aircraft, the Department of Transportation’s Inspector General gets involved, often working with special agents from the FBI. For military aircraft, the Department of Defense, and the Defense Criminal Investigative Service step in.

Some say the FAA is, in effect, enabling an end-run around potential criminal investigations by withholding these types of allegations from investigators.

“If the FAA is not sharing the information with law enforcement, [offenders] are not going to get indicted, because most of the time law enforcement is not going to know about it,” said Ken Gardner, a retired FAA safety inspector who now teaches certification courses for the agency.

Criminal prosecutions against airplane manufacturers are rare; instead, victims and their families have taken to civil courts to pursue false claims and wrongful death suits. Under federal regulations, installing counterfeit or improperly manufactured parts isn’t a crime unless you’ve done it knowingly. The same goes for falsifying records.

But experts allege that the FAA’s lax attitudes allows the manufacturers to shrug away what little scrutiny they might face with a simple response: We didn’t know.

“Sadly, I’ve heard this many, many times,” said Schiavo, the former DOT Inspector General. “There are so many whistleblowers out of Boeing. But the FAA says ‘Boeing looked at it, and they found it not to be a problem,’ and they pretty much rubber stamp [it].

“They don’t make Boeing go and inspect all the planes. And I suppose a lot of these are out in the hands of end-users now. It’s pretty typical.”

Dreikorn, the former FAA inspector, concurs.

“The fact of the matter is, as a result of this whistleblower’s actions, we know of 273 nonconforming parts installed in the spoilers of Boeing 777 aircraft,” he said. “We are expected to rely on analysis and testing from the very companies that caused the problem.

“Trust must be earned, and the FAA’s aircraft certification office in Seattle has shown itself incompetent in ensuring the largest airplane manufacturer in the U.S. is capable of controlling its suppliers.”

Dreikorn added: “I rest no easier simply because the FAA says I should.”

Asked by The Crime Report to examine the FAA’s report on Shi’s complaint, another former safety inspector, who asked that his identity be withheld, said, “This investigation should have also involved the DOT Office of Inspector General for falsification of production records which are required documentation.”

The inspector was particularly concerned about the hundreds of critical parts that were installed in wing flaps that did not undergo stress relief or proper hydrogen relief treatment (baking).

“Carbon embrittlement is a big concern due to the fact that turbulence can change the normal stress loads that can cause a catastrophic failure,” he told The Crime Report. “The FAA should have followed up with Boeing to gain information of their notice to customers who had those parts installed on their aircraft.”

But the defective parts never even made it onto the FAA’s Unapproved Parts Notification database, which issues warnings to aircraft owners, operators, manufacturers, maintenance organizations, and parts suppliers about potential risks.

The safety of the flying public is our primary concern, and any allegation related to safety is thoroughly investigated. In late 2016 the U.S. Federal Aviation Administration investigated several allegations related to Moog Aerospace and confirmed two were substantiated.

Moog, working with Boeing, had already assessed these two issues and taken all necessary corrective actions. The FAA investigation confirmed that no further corrective action was required.

We refer additional questions to the FAA and Moog.

Failing Grades

The May 30 audit by the OIG found that the FAA had consistently violated a 2004 agreement with six federal law enforcement agencies to share reports and investigations about possible defective parts.

“As a result,” the OIG concluded after its two-year review of the agency, “the FAA cannot accurately account for the number of SUPs or track safety-related trends to share with senior FAA management and Federal law enforcement agencies about the risks posed by unapproved parts.”

In response to the audit, the FAA finally did share data with law enforcement authorities on allegedly substandard or counterfeit airplane parts– many of which are currently in use by commercial jetliners flying today.

But the whistleblower’s story also raises questions about whether federal law enforcement is sufficiently aggressive in monitoring possible counterfeiters.

The OIG, which has the authority to conduct criminal investigations, confirmed to The Crime Report that it received Shi’s complaint and had decided not to investigate. But it would not explain on what grounds his complaint was rejected.

The FAA’s defenders argue that the commercial aviation industry itself is better equipped to monitor suspected unapproved parts and remove them if necessary—a laissez-faire approach which they say ensures airline safety.

“Certificate holders (FAA-approved aviation businesses) must protect themselves and their work with or without government help,” said a spokesperson for the Aeronautical Repair Station Association (ARSA), a global trade association for the civil aviation maintenance industry.

“This responsibility is what keeps flying the safest form of transportation.”

Meanwhile, in response to a request from The Crime Report, the FAA issued the following official statement:

The FAA oversees the design and production of hundreds of millions of aviation products and parts each year. More than two decades ago, the agency developed an enhanced Suspected Unapproved Parts (SUP) program, which resulted in a marked decrease in SUP cases. In rare instances where the FAA determines SUPs have entered the system, we issue corrective measures that mandate timely action by affected owners and operators.

FAA inspectors perform follow-up surveillance of all corrective actions that aircraft owners and operators, and aircraft manufacturers and parts manufacturers, take in response to SUP cases.

In Shi’s case, however, the FAA closed out the investigation without reporting the defective parts as ‘suspect.’

Vigilant in the 1990s

Things weren’t always so lax.

The 1990s saw a more aggressive enforcement period following the 1989 crash of Partnair Flight 394, which killed all 55 people on board, and was blamed on defective counterfeit parts and substandard maintenance.

During Mary Schiavo’s six-year tenure as Inspector General, her office led investigations that resulted in over 150 convictions for fraudulent parts.

“There are a few people still in jail as a result of that,” said former FAA inspector Dreikorn, whose SUP team included several FBI agents who led raids on fabricators of unapproved parts.

But the program was disbanded in 2007.

Gardner, who teaches FAA certification courses (including unapproved parts training) at JDA Aviation Technology Solutions, there are fewer agents assigned to the OIG these days, and they are spread thin across all crimes involving transportation.

“If it’s something that’s not going to draw a lot of attention, and it’s not really a safety issue, they’ll just kind of leave it up to the FAA to deal with it,” added Gardner, who also trains law enforcement how to spot counterfeits and falsified records.

But according to independent experts and whistleblowers, law enforcement lacks the expertise to determine what might be a safety threat, and instead has to rely on the industry itself.

Gardner, like Dreikorn, says the risks have escalated in recent years as aviation manufacturers increasingly outsource to developing markets.

“We know there’s a lot of counterfeit parts coming out of China,” he told The Crime Report.

“There’s a lot of Sikorsky [owned by Lockheed Martin] parts, and the problem is, they have the companies over here send all the data, the drawings and specifications and everything for the parts to be made at other facilities in China as a supplier.

“But they don’t stop there. Because they figure there’s money in it, they can actually manufacture other parts and send them over here with false documentation.”

Shi’s case adds a troubling new dimension to the problem of overseas quality control: last month, a judge denied him U.S. whistleblower protection because he worked in Shanghai.

“A good repair station won’t risk business on risky parts.”

Nevertheless, ARSA, the aeronautical repair group, argues that companies outside the U.S. have an equal interest in avoiding fake or fraudulent manufacturers.

“A good repair station won’t risk business on risky parts,” the ARSA spokesperson told The Crime Report, noting that non-U.S. firms have access to the FAA’s database, which “allows certificate holders to help ‘police’ the flow of parts with questionable origins or paperwork.”

Some aviation experts point out, however, that the current system fails to account for human nature.

Mike Danko, a civil attorney and pilot who uncovered the role of an unapproved part in a deadly 2014 plane crash, cites what he says is the “well-known” example that “a pilot is never criminally prosecuted unless he is drunk—it doesn’t matter how stupid, reckless he is, or how many people are injured—[and] because that’s so well known, there’s a small group of renegade pilots who say, ‘this is easy—either I’m not going to get the license, or my license is revoked, I don’t care.

“I’m going to continue to fly because—what happens if I get caught?’”

The audit’s findings underline the charges by many of the outside experts interviewed for this article that the FAA itself is in need of an overhaul.

Even if FAA inspectors were inclined to be more aggressive, they currently don’t have the technical skills to perform physical examinations to determine if there is a safety risk.

“The FAA really defers to Boeing expertise,” said Mary Schiavo, noting that the agency even allows the company to self-certify its aircraft.

“The FAA doesn’t have the expertise to match talent with Boeing.” (Boeing has even contended in federal court that it is a “representative” of the FAA).

“It’s a paperwork chase,” added Mike Danko, the pilot and aviation attorney. “It’s not quality control, or quality assurance. As a general rule it’s just a record-keeping inquiry.”

Are Our Planes Safe?

Has the FAA’s current approach to counterfeit parts increased the safety risks for the thousands of passengers who fly U.S. jetliners every month?

The FAA and its defenders say it hasn’t.

But last year, after compiling and analyzing National Transportation Safety Board (NTSB) reports, the NBC Bay Area Investigative Unit found that “unapproved parts” had played a role in close to two dozen airplane crashes in the U.S. since 2010, resulting in seven fatalities and 18 injuries.

The majority of the crashes either took place in U.S. airspace or involved U.S. aircraft under FAA jurisdiction, according to an NBC reporter, minus one or two overseas cases referred to the FAA that involved forged FAA tags.

Independent aviation experts think this number may actually be much higher. However, the NTSB refuses to release information on its investigations of major catastrophes that have happened overseas, even when they involved a U.S. manufacturer.

When Danko investigated the 2009 Cessna crash that killed Dr. Ken Gottlieb, he found that an unapproved part had jammed during takeoff, and that Gottlieb’s mechanic had faked an inspection just days earlier. A civil jury awarded Gottlieb’s family over $10 million dollars.

Afterwards, said Danko, “I asked the FAA to investigate. They investigated and found basically no specific violation of any regulation. And that mechanic still has his license.”

As for any criminal investigation, “law enforcement is virtually never interested,” said Danko.

That holds true in Shi’s whistleblower case.

For the past two years, his dogged attempts to alert the OIG, both directly, and through the fraud hotline, have come to nothing. The OIG’s official reply: “We Anticipate No Further Action From Our Office Regarding This Matter And Thank You For Bringing This Information To Our Attention.”

New HongJi, the Chinese company that was found to have produced defective parts and falsified records, continues to manufacture Moog parts for installation onto Boeing military and commercial aircraft. Aircraft Group of Moog, Inc, holds the certificate for these parts— meaning the case falls within U.S. jurisdiction.

“You can explain away an accounting error,” said former FAA inspector Dreikorn.

“But when you have that coupled with forged documents— it means there is no reliability in the system, and then everything that comes out of the system is as far as I’m concerned, suspect.”

Appeal to an Irrelevant Authority

An FAA investigation—which the OIG audit shows to be unreliable—can also make or break a fraud case.

Take the 11-year, $4.8 billion false claims suit against Boeing and Ducommun for defrauding the U.S. government, which was thrown out on appeal in 2016. The lawsuit claimed that Boeing used off-spec parts in 737 Next Generation aircraft that it sold to the U.S. military (P-8 Poseidon), and then produced false documentation to cover it up.

The judge made his determination based on the fact that Boeing and the FAA both disagreed with the whistleblowers as to how the manufacturing specifications could be interpreted. Because of this wiggle room, intent could not be proven.

“We know it was willful, because after they ‘discovered’ it, they then went back to the company that was making the defective parts, or the non-conforming parts, and they cut a side-deal with them authorizing them to continue doing it in exchange for some price concessions,” William Skepnek, a whistleblower attorney who worked on the case for over a decade, told The Crime Report.

But, he added: “Because the FAA didn’t make a finding, then I guess reasonable minds can differ, and if reasonable minds can differ, well than you can’t prove intent…. which is of course not the law.”

“I don’t think there ever was a criminal investigation. There was a DCIS investigator who was assigned to the case. And the DCIS investigator simply handed it off to FAA, and accepted what FAA did, and did no investigation on his own.”

Skepnek’s team started digging into the case, and “we found that the DCIS investigator had no knowledge of aircraft parts.”

“So there literally was no independent criminal investigation.”

The FAA, in turn, accepted Boeing’s own internal investigation into the matter, said Skepnek. According to Dreikorn, who was engaged as an expert witness by the whistleblowers: “I was able to independently determine that, yeah, Boeing had done some wrongdoing, they had covered it up, and the FAA at the local level was in cahoots.

“And I took it all the way up to the Associate Administrator, and she killed it.”

Skepnek continued: “Ultimately, the federal judge in Wichita determined that because the FAA hadn’t done anything about it, then that meant that the FAA found it was all good.”

The 10th Circuit Court of Appeals also sided with the opinion of Boeing engineers and the FAA.

It might be surprising to the average person that the agency tasked with aviation safety doesn’t perform physical inspections and investigations itself. But according to Dreikorn, most judges are unaware of the fact .

“They think that the FAA is infallible. I’ve stood in front of many state and federal judges, and told them that the FAA system is flawed, and they wouldn’t accept it,” he said.

“And as a lone expert, how can I stand up to the FAA?”

At least 3 or 4 crashes …should have been tolerated, but the fuselage came apart.

The two aviation experts, an engineer, and a former NTSB crash investigator working with Skepnek on the whistleblower case believe that several Boeing 737 Next Generation crashes remain unexplained.

“What our guys said was, and we actually submitted this to the FAA, the real weak spots were in front of and behind the wings. And there are at least 3 or 4 crashes, hard landings, that should have been tolerated, but the fuselage came apart— with some deaths.

And there were a couple of airplanes that came apart in the sky, and nobody lived through that. These were all Next Generations,” said Skepnek.

Dreikorn said he’s been pushing for the National Transportation Safety Board to look into secondary failures for years, which are often more fatal than the primary cause for the accident. “You can’t always prevent the causing event— but make the survivability better.”

“There needs to be more transparency in the industry with these investigations, because they get put under a federal order of stealth— nobody gets to see what’s going on. And even afterwards, it’s under protective order.”

Dreikorn’s FOIA requests to the NTSB for information on crash investigations in Jamaica, Colombia, Kenya, and Ethiopia were all rejected.

“And the reality is, this is taxpayer money, these are our products, the taxpayers’, they should have a right to see what’s going on and be able to get [data]— whether they’re from the media or academia— to look at this stuff so we can understand what’s going on.

“Are our employees, our government employees, working in the best interest of the taxpayers?”

Rep. Peter DeFazio (D-Oregon), ranking member of the House Transportation Committee, who requested the original OIG audit, told The Crime Report that he was concerned that FAA’s Suspected Unapproved Parts Program “had not been reviewed in more than 20 years.”

“Eliminating the serious risk posed by unapproved aircraft parts is a critical safety matter that must be dealt with,” he said, adding that the Inspector General’s findings “confirm the need for improved tracking of suspected parts by the FAA and continued congressional oversight of the SUPs program.”

Weakening Federal Regulation

That task may now get harder under an administration determined to reduce federal regulation.

DeFazio has been leading a fight in the House against a bill that would privatize the agency’s air traffic control system and remove over 30,000 federal employees from the federal payroll. The bill was rejected by the Senate on Tuesday, and must go to a floor vote before the September 30 deadline for FAA reauthorization.

In the meantime, the FAA Rulemaking Advisory Committee has recommended rolling back several aviation safety standards earlier this month, including those governing pilot training.

Dreikorn believes that change has to begin with the agency’s leadership, noting that the FAA’s new Associate Administrator for Aviation Safety, Ali Bahrami, was plucked straight from an aviation industry lobbying position in June. After beginning his career in manufacturing, Bahrami alternately worked in the FAA, and then Boeing, before moving on to become vice president of Civil Aviation for the Aerospace Industry Association.

“Until there’s a decision within the organization to behave differently, until the leadership holds the entire organization accountable to perform as they should for public safety, nothing’s going to happen,” he said.

Editor’s note: This article was updated to include Ali Bahrami’s history with the FAA, as well as prior history in aerospace manufacturing.

Victoria Mckenzie is deputy editor of The Crime Report. She welcomes readers’ comments.

]]>https://thecrimereport.org/2017/09/20/faa-warned-boeing-777-737-ntsb-airplane-parts-china/feed/6Sen. Menendez Bribery Trial Starts in New Jerseyhttps://thecrimereport.org/2017/08/22/sen-menendez-bribery-trial-starts-in-new-jersey/
https://thecrimereport.org/2017/08/22/sen-menendez-bribery-trial-starts-in-new-jersey/#respondTue, 22 Aug 2017 10:40:44 +0000https://livesite.qdoznr1-liquidwebsites.com/?p=186950More than two years after he was indicted on a litany of bribery and corruption charges, U.S. Sen. Robert Menendez (D-NJ) is finally going to trial in a case that could end his political career and dramatically change the dynamics of the Senate, reports NJ Advance Media. Menendez is accused of accepting lavish personal gifts, expensive meals and golf outings from Dr. Salomon Melgen—as well as hundreds of thousands of dollars in political donations—in exchange for lobbying for his benefactor’s extensive financial and personal interests in Washington. Melgen, who was convicted in April in a Medicare fraud case in Florida, is on trial with Menendez as well.

Jury selection begins today before U.S. District Judge William Walls in Newark, where federal prosecutors will present a case heavy on salacious details of the favors Melgen allegedly bestowed on Menendez, including a stay in Paris, vacations in the Dominican Republic and trips on private corporate jets. Defense attorneys will paint a picture of a 20-year bond of friendship between the two men that had little to do with politics. They have argued that much of the indictment describes actions by Menendez’s staffers, rather than the senator himself, “and many involve trivial functions rather than official acts.” They called the indictment “hopelessly vague and defective.” Menendez and Melgen were charged in April 2015 by the U.S. Justice Department’s Public Integrity Section. The unit was criticized for its failed 2008 prosecution of U.S. Sen. Ted Stevens (R-AK), whose conviction was thrown out because prosecutors did not share evidence with the defense that could have exonerated him. More recently, the unit won a conviction against Philadelphia politician Renee Tartaglione, who was accused of defrauding a mental health clinic of which she was president and landlord.

]]>https://thecrimereport.org/2017/08/22/sen-menendez-bribery-trial-starts-in-new-jersey/feed/0White Collar Crime: Why Top Execs Escape Prosecutionhttps://thecrimereport.org/2017/07/12/white-collar-crime-why-top-execs-escape-prosecution/
https://thecrimereport.org/2017/07/12/white-collar-crime-why-top-execs-escape-prosecution/#respondWed, 12 Jul 2017 15:58:48 +0000https://livesite.qdoznr1-liquidwebsites.com/?p=174907When Pulitzer Prize-winner Jesse Eisinger covered capital markets for the Wall Street Journal and Conde Nast Portfolio in the early 2000s, he began to see early hints that the subprime market bubble was close to bursting. When the inevitable crash happened, he probed further into the roots of the disaster for ProPublica. His exploration of what he terms “bad behavior” has now turned into a book that bluntly takes the federal government to task for not prosecuting the financial skullduggery that seemed hard to miss at the time.

Like the book’s title, “The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives,” Eisinger doesn’t mince words. In a conversation with TCR Deputy Editor Victoria Mckenzie, he explains how the “culture” of prosecution at the Justice Department has subtly changed as “hot-shot” government lawyers look forward to lucrative careers as white-collar defense attorneys, why he thinks the Obama Administration accentuated the shift, and why the DOJ should consider hiring lawyers who are older and come from more diverse backgrounds.

The Crime Report: What drove you to write the book?

Jesse Eisinger: [When I moved to Pro-Publica] we did a series of stories about bad behavior from the banks in the lead-up to the financial crisis. Misleading investors about CDOs [Collateral Debt Obligations]. It was sort of excavating the big short trade, where people were secretly betting against these structures. And what we found was a hedge fund that had secretly gone to investment banks to have them make these mortgage securities, and then secretly was betting against them. Sometimes the investment banks knew.

We found a lot of other [bad] behavior in this CDO market, which were bundles of bundles of mortgages, very complicated instruments, and we thought it was obvious that there was going to be a huge crackdown coming. And then really nothing happened. No criminal investigations. My book is not a criminal brief, making the case for prosecutions of some individuals. I’m not a lawyer, that wasn’t the task I set before myself. But I set out to explore why this [prosecutions] isn’t happening. And one of the reasons it’s not happening is that they didn’t really even look. If you don’t look, you’re not going to find crimes.

It started to dawn on me that the Department of Justice and the SEC were broken institutions when it came to corporate white-collar [crime] enforcement. In the wake of the financial crisis, I started to see other examples in the tech world, in the pharmaceutical world, in the industrial world, in retail— Walmart, Google, Pfizer— companies that were making mistakes, admitting to wrongdoing, [even] criminal wrongdoing, but no senior individuals were being charged. I realized that this is a broken system, and I thought this really needed some kind of true examination from a historical perspective. I wanted to figure out— how did this evolve?

TCR: One of the large themes in your book was that zealous DOJ prosecutors in the early 2000s actually created the market for white collar criminal defense (or ‘Big Law’), and the two almost evolve into a single entity in some senses. You write that it is now almost a forgone conclusion that a young prosecutor will end up in a lucrative private firm.

JE: That’s a really big part of the problem, and I wanted to do trace how it came to happen. When you had these big white-shoe law firms in the 1950s, 1960s, they didn’t do criminal representation for their corporate clients. That was done by boutique firms that specialized in criminal law. In fact the criminal bar was kind of looked down upon by the white-shoe firms at that point.

“The DOJ is being treated like a training ground for future criminal defense lawyers.”

Today, there’s a seamless world, where prosecutors– mostly young— in the Southern District and Main Justice, the hottest shots from the Department of Justice, almost all go to white collar criminal defense work after their stint at the DOJ. Essentially, the DOJ is being treated like a training ground for future criminal defense lawyers.

The people at the Southern District and now in Main Justice are the best of the best of the best. They have gone to the best high schools, to get into the best colleges, to get into the best law schools, to get the best clerkships, and then they’ve gotten these very competitive jobs as prosecutors. They’re pleasers. They’re not free spirits, they’re not entrepreneurs particularly— they’ve taken a relatively safe path to be lawyers. They are straight arrows— admirable people who want to do public service. It’s not the ‘bro’ culture of Silicon Valley. But they’re kind of rigid in their thinking.

[But when] you’re in the prosecutorial role, it’s a completely different incentive. You need to be a displeaser, you need to seek to deprive people of their liberty when they’ve done something wrong. And when you’re going up against corporate criminals, you’re going up against the sons and daughters of your professors or the parents of your classmates. There’s a sort of elite affinity where they just don’t look at well dressed, articulate, well-dressed bankers from Goldman Sachs, and see a criminal.

TCR: You write that in fact, these young prosecutors have to become “class traitors.”

JE: Yeah. [Robert] Morgenthau was a traitor to his class. But these [current] people are not, by and large, and it takes an enormous effort for them to overcome that, and I just don’t think they can.

TCR: When you get into the Obama period, those are really the “scorched earth” chapters. But did this shift have roots in the Enron and Andersen prosecutions of the early 2000s?

JE: The point of those [Enron/Andersen] chapters is that it is the most recent high-water mark for corporate prosecutions– but it is also the beginning of the undoing. And they have success prosecuting the top executives from Enron, and they also end up prosecuting the top executives from Worldcom, Adelphia, Tyco, Global Crossing. They bring the top executives from Health South to trial. So they really do most of the big marquee corporate scandals of the age, they manage to prosecute the executives.

Prosecutors will say those were easier, more obvious crimes, or those were inevitable, or it was obvious that they were going to get the Enron guys because that was a total fraud— but in fact, I don’t agree with any of that. I don’t think it was inevitable that they were going to prosecute those people. And especially I think that getting the two heads of Enron, Ken Lay and Jeff Skilling, was extremely difficult. They had to work for years at it. They got a little lucky, they worked very hard. They had very good strategy. They didn’t have any direct evidence against them, so they had to flip people, work your way up the way you need to do it if you’re prosecuting the mob. And they did.

What happens, bizarrely, is that the lesson from the Arthur Andersen prosecution becomes unlearned, or the Department of Justice learns the entirely opposite lesson from it— which is that we should never prosecute another large company again, because we throw people out of work. There are collateral consequences–either systemic disruption of the markets (we see that later in the financial markets) or we see people being put on the street, unemployed. I don’t think that’s proper for a prosecutor to think about.

Jesse Eisinger

We don’t think of the collateral consequences of putting an embezzler in prison, or a murderer in prison, or the thief of a television in prison. But we do think about it with a corporation.

TCR: Although reformers do talk about that when it comes to street level crime, it’s one argument for reducing sentences, punishment, etc— you’re hurting families, you’re hurting society, the economy [mass incarceration].

JE: My argument is, in a nutshell, we should put fewer of a certain kind of person in prison, and more of another kind of people in prison— basically, fewer young black men and more older white men, to be overly simplistic about it.

“One of the problems is that they prosecute so few individuals that they throw the book at them.”

I think putting [an executive] in prison for three to five years is something they need to refocus on. They need to go back to prosecuting individuals, and they need to seek sentences— but they shouldn’t seek draconian, insane sentences. One of the problems is that they prosecute so few individuals that they throw the book at them. They overcharge them, they invest so many resources and time into it and then they want to get some extraordinary prison sentence out of it— 18 years, 30 years.

TCR: Is that what happened when former acting Attorney General Sally Yates came in, and tried to bring the focus back to prosecuting individuals rather than just settling with companies?

JE: Yes. It was too early to see whether the Yates memo was taking effect, and now under [Attorney General Jeff] Sessions it seems highly unlikely that they’ll do that. So I’m extremely skeptical that they’ll be tougher on corporate criminals than the Obama administration, and the Obama administration was extremely light-handed. But we have to see. What’s going to happen I think in the Sessions case is that they’ll get a few low-level individuals, but they’ll not even do the corporate settlements, so that settlements will come way down.

I think the fact that we don’t prosecute criminal executives in this country undermines the sense of justice for the person on the street. I think that they see this as a rigged system, and it is a rigged system. It’s rigged in the favor of these criminals who can commit crime with impunity as long as you’re in a certain position in a corporation.

TCR: Why was there so much political fear and meddling from the front office during the Obama administration?

JE: Before we get to timidity, there are a few things to point out. One is that the resources have shifted, so that there are fewer people in the FBI who are really trained in this. The SEC was hollowed out in the second half of the Bush administration, and so it was suffering, morale was really in bad shape. Those are two sort of structural problems that the Obama administration had going into the financial crisis, that they couldn’t really do anything about. So that’s sort of step one.

Step two is after a decade of focusing on settlements, there has been an erosion of talent. Erosion of skill, especially trial skill. They do fewer trials, and this is happening across the criminal justice system. The problem with doing fewer trials, especially in the corporate white collar space, is that your skill set erodes, you become very scared of trials, they seem very difficult to do, you’re going up against defense attorneys that have done a lot of these cases and had trials, so you’re enormously intimidated by the prospect of having to persuade a jury.

So it’s not just timidity: I think they have lost the ability to prosecute these cases.

TCR: Effectively, this has cut out the public?

JE: It has cut out the public, because the public cannot see the evidence— they don’t have an airing of the wrongdoing, and public airing of wrongdoing is an enormously beneficial thing for a society. The sense that no one was held accountable, there’s no debate— fueled the rise of Donald Trump. I mean, Donald Trump talked about Goldman Sachs owning politicians.

Of course, then he installs Goldman Sachs executives in the White House and gives it over to the bankers and corporations— but he tricked his supporters into thinking that he was somehow their champion, by attacking corporations for not being held accountable.

TCR: In the book, you make a strong call for diversity in the justice department.

JE: Part of the solution is more diversity— and I don’t mean just the way the phrase is used in terms of gender diversity or racial diversity. What I’m talking about is class and geographic and professional diversity. You want to break the grip that the elite law schools have on feeding the Department of Justice’s elite offices. Go to Wisconsin, go to Minnesota. Go out of Virginia and go to Georgia tech. Go to the West Coast, go to Montana.

The other thing is that you need age diversity. There’s a culture at the Department of Justice, if you’ve worked there for six or eight years or longer, then you’ll start to be looked down upon, like you’re a “lifer.” What we should do instead is get some people who are sick and tired of corporate law at age 52, and 55, who know where all the bodies are buried, and want to spend the last ten years of their careers serving society, and doing public service. They’re not trying to burnish their resume, you want them to be sick and tired of it.

And then I think you need plaintiffs’ lawyers, you need advocates, you need consumer lawyers— you don’t just want defense lawyers, or future corporate defense lawyers to go become prosecutors. And if you break that mold, you’ll start to help the culture.

I think they need to do many more trials. They need to seek lower sentences, so that any one single trial isn’t invested with all this importance. The other thing that they need to do is to focus on individuals, and somehow allow prosecutors to work on cases that don’t come to fruition very quickly, that build slowly and quietly,

TCR: How many prosecutors, and former prosecutors, did you speak to in the course of writing this book?

JE: Probably well over a hundred— dozens and dozens.

TCR: What insight did you get into how an irascible, tough white-collar prosecutor shifts to representing corporate criminals? What did people think that they were doing? How did they describe it?

JE: Well, it’s a real mix— from people who weren’t that interested in being prosecutors, they were always interested in making a lot of money and being defense lawyers, but this was a way to burnish their resumes. There are some people on the opposite spectrum, who feel a little bit rotten about it, but they felt like they had no choice because they needed to support their family.

And also they had no choice because in their careers, they had to keep moving. They had been conditioned to always be succeeding,

TCR: When it comes to financial crime, why is ignorance of the law a defense?

JE: It’s very hard to understand. In street crime, you don’t have to prove mens rea, because you’re essentially supposed to know that drug dealing is wrong, or murder is wrong, or recklessly driving a vehicle is wrong. And so that’s all implicit— it’s part of the law, but it’s implicit. But in white collar law, and this is the most difficult thing— you have to demonstrate that… so, mens rea is not just special to white collar law, corporate law. But the problem is that when you’re dealing with accounting, or securities, things like that, you have to show that not only was the accounting wrong, but you knew it.

And it makes some sense, I think. You don’t want to throw people in prison for innocent mistakes. The problem is, it makes it so difficult to actually prove a crime that they become wary of it and they don’t even try.

TCR: And this further insulates executives?

JE: Executives have an enormous amount of insulation, and they also get to rely on the experts— they rely on legal counsel, they rely on accountants, and you have to break that. And the way you break that is you need to pick your cases of accountants and lawyers and investment bankers who are giving advice to these executives, who turned out to be criminal. And because of that, you put these professional classes, these professions… the law, accounting, auditing, on notice. And there’s a real deterrent effect.

Victoria Mckenzie is Deputy Editor (Content) of The Crime Report. This interview has been condensed and edited for space. Readers’ comments are welcome.

]]>https://thecrimereport.org/2017/07/12/white-collar-crime-why-top-execs-escape-prosecution/feed/0‘I’m Dirty’: OR Official Admits He Took $300G in Bribeshttps://thecrimereport.org/2017/06/21/im-dirty-or-official-admits-he-took-300g-in-bribes/
https://thecrimereport.org/2017/06/21/im-dirty-or-official-admits-he-took-300g-in-bribes/#respondWed, 21 Jun 2017 11:48:33 +0000https://livesite.qdoznr1-liquidwebsites.com/?p=169425A former official with the Oregon Department of Energy has pleaded guilty to accepting nearly $300,000 kickbacks in connection with the sale of state energy tax credits, reports the Oregonian. Joe Colello, who previously managed tax credit sales for the department, was under investigation for expediting the sale of tax credits for a private energy consultant. He pleaded guilty Tuesday in Marion County Circuit Court to racketeering, receiving bribes, aggravated theft, tax evasion and official misconduct. “I’m dirty,” Colello told the Oregonian in an emotional interview Sunday. “I made mistakes.” He agreed to serve five years in prison and pay restitution of $1.3 million.

According to court documents, Colello accepted cashier’s checks on 52 separate occasions from a Seattle-based energy consultant, Martin Shain, who is already under indictment on forgery accusations. Shain was both a consultant on energy projects and a tax credit broker. Colello, meanwhile, had knowledge that was very valuable to brokers: The list of approved recipients looking to sell their tax credits as well as the buyers in the market for them. That relationship gave Shain an inside track to market his services, complete the sales and earn lucrative commissions. Shain gave Colello as many as three checks a month, ranging in value from $1,000 to $14,130, from August 2012 to March 2015.

]]>https://thecrimereport.org/2017/06/21/im-dirty-or-official-admits-he-took-300g-in-bribes/feed/0Ex-L.A. Sheriff Baca Gets Three-Year Prison Termhttps://thecrimereport.org/2017/05/13/ex-l-a-sheriff-baca-gets-three-year-prison-term/
https://thecrimereport.org/2017/05/13/ex-l-a-sheriff-baca-gets-three-year-prison-term/#respondSat, 13 May 2017 13:25:40 +0000https://livesite.qdoznr1-liquidwebsites.com/?p=157801Former Los Angeles County Sheriff Lee Baca, once a towering, respected figure in policing, was sentenced to three years in federal prison for his role in a scheme to obstruct an FBI investigation of abuses in county jails. The action on Friday marked an end to a corruption scandal that has roiled the Sheriff’s Department for several years, the Los Angeles Times reports. U.S. District Judge Percy Anderson sentenced Baca, 74, who is suffering from the early stages of Alzheimer’s disease. Anderson, who last year threw out a plea deal that would have sent Baca to prison for no more than six months, unleashed a scathing rebuke of the man who ran one of the nation’s largest law enforcement agencies for 15 years.

Excoriating Baca’s refusal to accept responsibility for having condoned the obstruction ploy carried out by subordinates, the judge portrayed him as a man driven by his desire to protect his own reputation and maintain control over the Sheriff’s Department. “Your actions embarrass the thousands of men and women [in the department] who put their lives on the line every day,” Anderson told Baca. “They were a gross abuse of the trust the public placed in you.” The prison term, Anderson added, should serve as a deterrent to other public servants. He said, “No person, no matter how powerful, no matter his or her title, is above the law.” Baca was ordered to surrender by July 25. Baca’s second in command, former Undersheriff Paul Tanaka, is serving a 5-year term.

]]>https://thecrimereport.org/2017/05/13/ex-l-a-sheriff-baca-gets-three-year-prison-term/feed/0Corporate Crime in the Age of Trumphttps://thecrimereport.org/2017/02/08/corporate-corruption-in-the-age-of-trump/
https://thecrimereport.org/2017/02/08/corporate-corruption-in-the-age-of-trump/#respondWed, 08 Feb 2017 13:00:34 +0000http://thecrimereport.org/?p=118726At the beginning of his second week in office, President Donald Trump signed an executive order requiring government agencies to identify two regulatory rules that would be dropped for each new regulation they issue.

This executive order, at its pyrrhic best, establishes no working principles upon which regulations are adopted or rejected. At its judicial worst, this executive order is just plain stupid and makes no economic sense.

While his executive order will undoubtedly be challenged in a court of law— Gregory Wawro, an expert on American legislation from Columbia University maintains it’s not a legitimate use of presidential authority—arguments about Trump’s regulatory house-cleaning are a distraction from the government’s persistent failure to seriously to curb corporate criminality and fraud.

This issue, for example, has nearly been lost in the current debate over the future of the Dodd-Frank legislation passed during the Obama presidency, which was aimed at curbing the power of big banks.

Last week, Trump stepped up his repeated criticism of financial regulations for their alleged negative impact on economic growth. Speaking to a group of small business owners, he declared, “We’re going to be doing a big number on Dodd-Frank.”

When it comes to addressing corporate wrongdoing, Dodd-Frank was an ineffective instrument to begin with.

But concerns that weakening or scrapping Dodd-Frank or, as it’s officially known, the 2010 Wall Street Reform and Consumer Protection Act, will encourage a repeat of the kind of corporate chicanery that contributed to the 2008 financial crisis are misplaced.

When it comes to addressing corporate wrongdoing, Dodd-Frank was an ineffective instrument to begin with.

How many of these rules were effectively implemented is anyone’s guess.

True to his word, the new president signed an executive action to further scale back Dodd-Frank, directing the Treasury secretary and financial regulators to come up with a plan to revise the rules set in motion in 2010.

Undoubtedly, that action represents a step backward. His order, among other things, would undo the Department of Labor’s expanded fiduciary rule. or definition of what constitutes an “investment” put in place in April 2016.

According to White House adviser Gary Cohn, the plan is also likely to alter the post-crisis Financial Stability Oversight Council, or the mechanisms in place for winding down giant faltering companies and for overseeing big financial firms that are not traditional banks.

Yet, although the President and his advisors promise to dismantle the Financial and Consumer Protection Act of 2010, the Trump Administration appears to have ruled out the possibility of an all-out repeal of the law.

Trump has stated that he will work with the Republican-controlled Congress to roll back only those reforms that they view as going too far to hinder banks from making both strategic investments and loans.

The CFPB greatly expanded regulators’ ability to police such common consumer products as mortgages, credit cards, and student loans. In fact, the Bureau has had the power to enact new rules to protect individuals against bad practices in credit cards, home mortgages, account overdrafts, and payday loans.

Most experts tend to agree that the CFPB has been fairly effective, not unlike the successful U.S. Consumer Product Safety Commission established by the Nixon Administration in 1972. Similarly, most experts agree that a relaxation of Dodd-Frank rules would raise the likelihood of another financial crisis fed by high-risk securities.

Nevertheless, on February 1, the Republicans and Trump, using the 1996 Congressional Review Act (CRA), made it crystal clear that, with respect to climate change and environmental regulations, the interests of oil and coal and capital would always at least in the short term trump the interests of the health-consuming public.

On the same day, the Republican-controlled Congress began using the CRA to repeal any rules finished by Obama after mid-June 2016. The number of such major regulations exceeds 50. The first five to be gutted include: the stream protection rule for coal mining; the methane waste rule; the resource extraction rule; the “blacklisting” rule for contractors; and the social security gun rule for persons diagnosed with a mental illness.

Yet despite these early and other regulatory rollbacks, especially in the areas of environmental protection, I believe Dodd-Frank will not be significantly altered.

I take this position for three basic reasons:

First, Trump and company will require some cooperation (and votes) from congressional Democratic members who for the most part believe that the Obama-era financial reforms did not go far enough to reign in the crimes of Wall Street.

Second, there is a cadre of former Goldman Sachs bankers whom the President has tapped for key roles in his administration, including Anthony Scaramucci (Senior White House Advisor), Dina Habib Power (Senior Counselor for Executive Initiatives), Steve Bannon (White House Chief Strategist), Steve Mnuchin (U.S. Secretary of Treasury nominee), Gary Cohn (National Economic Council Chairman-appointee), and Jay Clayton (Securities and Exchange Commission Chairman nominee).

As these former Goldman Sachs bankers know all too well, the restructuring of securities investments over the past seven years has allowed for the circumventing of Dodd-Frank. In the process, global industrialists have become global bankers and global bankers have become global industrialists.

Thanks to an abstruse and limitless legal clause of the Financial Services Modernization Act of 1999, otherwise known as the Gramm-Leach-Bliley Act, Wall Street bankers are now buying and trading in entire industries no differently than the Koch (brothers) Industries.

Meanwhile, these oil industrialists and others are now engaging in financial transactions like those once limited to Wall Street.

As a consequence of these operational exchanges, one can argue that the risks and harms to both the economic markets and the bio-ecosystems remain essentially unaltered by regulatory reforms like Dodd-Frank and the Volker Rule.

Third, and also related to the second reason, many of the Dodd-Frank reforms were hollow or had no teeth to begin with, such as in the areas of executive compensation and corporate governance.

Most importantly, Dodd-Frank provided several loopholes or escape clauses to bail out the financial industry as a whole and to reproduce the recent history of banking on the Federal Reserve System. For example, forcing insolvency and bankruptcy, breaking up the too-big-to-fail institutions, ending taxpayer bailouts, and eliminating certain types of derivative practices were all written into the law conditionally.

In other words, the re-regulating of Wall Street following the banking implosion of 2008 never did a whole lot to protect against or reduce moral hazards, high-risk betting, or the next financially driven bubble in the economy.

At the same time, I think that some of the strongest components of Dodd-Frank will not be meaningfully reformed with Goldman Sachs in charge. For example, the strict requirements for how much capital large banks must hold to protect against their potential losses as well as the proportion of holdings with high quality trades, will probably remain in place.

Other Dodd-Frank reforms likely to continue are the expanded oversight and greater transparency involving derivative instruments as well as hedge funds transactions, including information about investments and all involved business partners.

Also, tighter restrictions over mortgage lending will not be rolled back.

So from the economic perspectives of both President Trump and his Goldman Sachs cronies, what needs to be repealed?

From the perspectives of Main Street, it should be realized that re-regulating or deregulating Wall Street has not and will not have any impact on the nefarious and fraudulent behavior of the big banks.After all, in the early 21st century, Dodd-Frank is still subordinate to and silent about the super-financialization of global capital. And, most significantly, the contradictions of financial justice exemplified by waivers and exemptions from punishment for high-stakes securities frauds, remain intact.

Re-regulating or deregulating Wall Street has not and will not have any impact on the nefarious and fraudulent behavior of the big banks.

Dodd-Frank introduced no new criminal laws to violate and none to repeal. All of the criminal laws necessary to prosecute the criminal behavior that caused the financial implosion and global recession were in place long before the 2008 crisis.

And nobody to date has proposed repealing any of those criminal laws.

The real problem, however, is that none of those criminal laws, as far as we know, have ever been used by the Department of Justice to investigate—never mind charging or prosecuting—one single person from any of those financial institutions that have paid hundreds of billions of dollars for their allegedly “noncriminal” behavior.

Gregg Barak

And that’s where the attention of reformers—even in the age of Trumpism—should really be focused.

Gregg Barak is a 2017 Fulbright Scholar to Porto Alegre, Brazil and Professor of Criminology and Criminal Justice at Eastern Michigan University. He is the author of several books on crime and justice and the recipient of the National White Collar Crime Center’s Outstanding Publication Award for his 2012 book, “Theft of a Nation: Wall Street Looting and Federal Regulatory Colluding. His latest book, Unchecked Corporate Power: Why the Crimes of Multinational Corporations are Routinized Away and What We Can Do About It,” will be published in London and New York on Feb. 21 by Taylor & Francis Group. He welcomes readers’ comments.

]]>https://thecrimereport.org/2017/02/08/corporate-corruption-in-the-age-of-trump/feed/0Residents of Graft-Happy FL City Ask, ‘What Happened?’https://thecrimereport.org/2016/12/30/residents-of-graft-happy-fl-city-ask-what-happened/
https://thecrimereport.org/2016/12/30/residents-of-graft-happy-fl-city-ask-what-happened/#respondFri, 30 Dec 2016 10:00:01 +0000http://thecrimereport.org/?p=103727The Miami Herald takes a look at the effects of endemic graft and bungling in Opa-locka, a Miami-Dade city of 15,000. Residents have paid a steep cost for the financial scandal, which landed on front pages last May when city commissioner Terence Pinder commissioner committed suicide by driving into a tree at 80 mhp. With millions in debts, Opa-locka was close to bankrupt. Local city leaders were shaking down business owners in parking lots for cash bribes. And Miami-Dade County had just cut off the city from getting any more public funds. “You get to a point where you say to yourself: What happened to this place?” said one resident, Natasha Ervin. “How did we get there?”

Taxpayers just now learning the costs they will be forced to pay for years of financial failures. In the past six years, Opa-locka has taken on nearly $15 million in debts — an amount that’s expected to take years to settle before the city is on solid financial ground. Local taxpayers — more than a third of whom live in poverty— pay the highest tax rate in Florida and one of the most expensive rates for water in Miami-Dade. Nowhere has the impact taken a greater toll than on Opa-locka’s employees — nearly a dozen of whom have lost their jobs through lay offs while the rest are forced to work fewer hours as the city struggles to pay its bills and avoid insolvency.

]]>https://thecrimereport.org/2016/12/30/residents-of-graft-happy-fl-city-ask-what-happened/feed/0Gov. Chris Christie Aides Found Guilty in “Bridgegate” Trialhttps://thecrimereport.org/2016/11/04/gov-chris-christie-aides-found-guilty-in-bridgegate-trial/
https://thecrimereport.org/2016/11/04/gov-chris-christie-aides-found-guilty-in-bridgegate-trial/#commentsFri, 04 Nov 2016 19:08:34 +0000http://thecrimereport.org/?p=854562Two former aides to New Jersey Gov. Chris Christie charged in a bizarre scheme of political retaliation against a mayor who refused to endorse the governor for re-election were found guilty by a jury on all counts in the long-running “Bridgegate” saga, reports NJ.com. In a seven-week trial that saw their own words used against them, Bill Baroni and Bridget Anne Kelly were convicted of helping orchestrate massive traffic tie-ups at the George Washington Bridge in 2013. The plot was hatched to send a pointed message to Fort Lee Mayor Mark Sokolich, after he stepped back from his earlier public support of Christie. Kelly cried and continued to sob as she heard the word guilty repeated time and again.

U.S. District Judge Susan Wigenton set the sentencing date for Feb. 21. Baroni and Kelly face a maximum of 20 years in prison, but are likely to serve far less under federal sentencing guidelines. Kelly’s attorney, Michael Critchley, said, “My client is innocent. This was a unique theory of prosecution (and) obviously we’re going to appeal.” Baroni said, “I am innocent of these charges, and I am very, very looking forward to an appeal.” Baroni’s attorney, Michael Baldassare, said, “In keeping with the disgrace that was this trial, one of the things the U.S. Attorney’s Office should be ashamed of is where it decided to draw the line on who to charge and who not to charge. They should have had belief in their own case to charge powerful people, and they did not.”

Former Pennsylvania Attorney General Kathleen Kane was sentenced yesterday to 10 to 23 months in prison for orchestrating an illegal news leak to damage a political enemy. The Philadelphia Inquirer says the penalty capped “a spectacular downfall for a woman once seen as one of the state’s fastest-rising stars.” Judge Wendy Demchick-Alloy said, “The case is about ego, ego of a politician consumed by her image from Day One. “And instead of focusing solely on the business of fighting crime, the focus was battling these perceived enemies … and utilizing and exploiting her position to do it.”

A tearful Kane pleaded for leniency, urging the judge to consider the impact on her sons. “I would cut off my right arm if they were separated from me and I from them,” she said. “Please sentence me and not them.” Unable to post $75,000 bail immediately, Kane was led in handcuffs from the courtroom to jail. She was released hours later, and will remain free on bail until she exhausts her appeals, a process that could take months. The sentencing marked a bitter end to a career that drew national attention after Kane, a Scranton-area prosecutor, in 2012 became the first Democrat and woman to be elected attorney general of Pennsylvania. The judge heard Kane’s supporters, including one of her sons, extol her accomplishments and describe how devastating her conviction has been. Montgomery County prosecutors called to the stand Kane’s current and former colleagues, who testified how she let a personal feud and paranoia poison the state’s top law enforcement office and plunge it into disarray.

Federal corruption charges were announced Thursday against two former close aides to New York Gov. Andrew M. Cuomo, a senior state official and six others, in a devastating blow to the governor’s innermost circle and a repudiation of how his prized upstate economic development programs were managed, says the New York Times. The charges against the former aides, Joseph Percoco and Todd R. Howe, and the state official, Alain Kaloyeros, were the culmination of a long-running federal investigation into the Cuomo administration’s attempts to lure jobs and businesses to upstate New York’s limping economy by furnishing billions of dollars in state funds to developers from Buffalo to Albany. Howe is cooperating with the investigation, according to a 79-page criminal complaint.

The charges stemmed from “two overlapping criminal schemes involving bribery, corruption and fraud in the award of hundreds of millions of dollars in state contracts and other official state benefits,” federal prosecutors said in the complaint. Percoco, who had served as Mr. Cuomo’s executive deputy secretary, is accused of soliciting and taking more than $315,000 in bribes between 2012 and 2016 from two companies. The bribes were arranged by Howe. In emails and other correspondence, Percoco and Howe referred to the bribes as “ziti,” according to the complaint.

]]>https://thecrimereport.org/2016/09/22/gorging-on-ziti-ex-aides-to-ny-gov-face-corruption-charges/feed/0Justice Department Drops Case of Ex-Gov. McDonnellhttps://thecrimereport.org/2016/09/08/justice-department-drops-case-of-ex-gov-mcdonnell/
https://thecrimereport.org/2016/09/08/justice-department-drops-case-of-ex-gov-mcdonnell/#respondThu, 08 Sep 2016 18:40:19 +0000https://livesite.qdoznr1-liquidwebsites.com/?p=61110Prosecutors will not attempt to retry former Virginia Gov. Robert McDonnell and his wife Maureen on corruption charges, ending a four-year saga that the Washington Post says “rocked [Virginia’s] political class and cut short the rise of a Republican star.” The decision is a major victory for the former governor, who has maintained that he did nothing illegal in his relationship with a nutritional supplement salesman. It’s a blow to the U.S. Attorney’s Office in Eastern Virginia and to advocates for strict enforcement of anti-corruption legislation.

The decision to walk away from the case comes less than a week after it was reported that the U.S. Attorney had recommended to the main Justice Department that the case should be retried. Some legal analysts said dropping the case is appropriate. “The decision not to prosecute vindicates those who believed all along that this case was an inappropriate extension of the bribery and gratuity statute,” said Jacob Frenkel of the firm Dickinson Wright. “Sometimes it takes the Supreme Court to rein in prosecutorial overreaching, and that is exactly what has occurred here.”

]]>https://thecrimereport.org/2016/09/08/justice-department-drops-case-of-ex-gov-mcdonnell/feed/0Chicago Graft Kingpin Gets 10 Years in Red Light Cam Scamhttps://thecrimereport.org/2016/08/30/chicago-graft-kingpin-gets-10-years-in-red-light-cam-scam/
https://thecrimereport.org/2016/08/30/chicago-graft-kingpin-gets-10-years-in-red-light-cam-scam/#respondTue, 30 Aug 2016 12:50:16 +0000https://livesite.qdoznr1-liquidwebsites.com/?p=57947John Bills, the insider convicted in one of the most brazen City Hall corruption cases in Chicago’s storied history of graft, was sentenced to 10 years in prison Monday by a federal judge who decried the damage done to public faith in government, reports the city’s Tribune. Bills’ voice broke with emotion as he acknowledged “ethical and moral” mistakes, but he denied masterminding the massive bribery scheme in exchange for growing the city’s controversial network of red light cameras into the largest in the nation. The 10-year prison term marked one of the stiffest ever handed down in Chicago’s federal court to a non-elected public official for corruption.

As part of the patronage army of House Speaker Michael Madigan, Bills rode his political connections to rise from street lamp maintenance man to the No. 2 post in the Transportation Department in 32 years with the city. In January, a federal jury convicted him on all 20 counts, including bribery, conspiracy, extortion and fraud, for steering tens of millions of dollars in red light camera contracts to an Arizona company, Redflex Traffic Systems Inc. The charges stemmed from a four-year Chicago Tribune investigation that exposed the scheme, as well as the mismanagement, failed oversight and dubious safety record of the $600 million red light camera program.

The curtain has closed on a Pennsylvania political tragedy of Shakespearian proportion—a drama that included sex, rivalries, secret meetings, corruption, impeachment, a public trial. and a litany of disgraced leaders.

Pennsylvania Attorney General Kathleen Kane, who resigned this week,was the first woman and first Democrat elected attorney general in a state that only began electing its attorney general in 1980. She campaigned as an outsider —a non-politician who had never before run for public office—who could shake up establishment politics in her state.

But her rise and fall offers a lesson about the importance of experience in running senior criminal justice agencies—not to mention holding high government office.

As we approach a presidential election pitting a self-proclaimed outsider against maybe the ultimate insider, there is something to be said for experience. Although President Obama said “There is nothing that truly prepares you for the demands of the Oval Office,” understanding compromise that comes with being a U.S. Senator, diplomacy that comes with being secretary of state, and humility that comes with being first lady can be helpful.

Kane’s lack of experience running a large office, dealing with the public scrutiny of high political office, and the failure to understand the nuances of politics proved disastrous for the citizens of Pennsylvania and has struck at the very core of the state’s criminal justice system

A jury of six men and six women took little more than four hours to convict Kane of perjury, conspiracy, official oppression, and false swearing. Her trial began last week and was highlighted by testimony from three insiders: ex-first deputy Bruce Beemer; a former aide and former beau, Adrian King; and political confidant and consultant Josh Morrow.

Her perjury conviction is a felony and can land her in prison.

Kane was a rising star in Pennsylvania politics. The former assistant county prosecutor won by an unexpectedly large margin when she beat a county prosecutor who was the son-in-law of the state’s first elected attorney general, Leroy Zimmerman.

She gained points during the campaign by attacking the sitting governor, her predecessor, Tom Corbett, and his handling of the Jerry Sandusky child molestation investigation. Kane suggested that Corbett slow-walked the investigation so the matter would not come up during his campaign for governor.

She vowed to investigate the investigation.

The investigation of the Sandusky investigation led to nothing. But the special investigator hired by Kane to look into the matter, uncovered the pervasive distribution of pornographic emails within the AG’s office and among other state officials.

In the process, a feud began with the chief prosecutor of the Sandusky investigation, Frank Fina. Fina left the AG’s office when Kane was sworn in and took a job in the Philadelphia District Attorney’s office.

All fingers pointed to Fina when a story broke that Kane discontinued a Philadelphia political corruption prosecution. In fact, Fina’s new boss, Philadelphia DA Seth Williams, agreed to take over the prosecution. Kane was incensed and said that Fina’s alleged action in leaking the story meant “war.”

She retaliated by leaking grand jury documents to the Philadelphia Daily News relating to a 2009 case involving J. Whyatt Mondesire which Fina declined to prosecute. Then Kane lied to a grand jury about ordering the leak.

Kane’s tenure has been tumultuous to say the least. Her law license has been suspended, and she survivied an targent impeachment attempt by the state house.

Kane arrived in office in January 2013 with little or no political experience. A former assistant district attorney for Lackawanna County, her period in office was filled with odd and frankly unbelievable conduct, followed by bluster about being the victim of the “old boys club.” In the process, she released a series of crude and pornographic emails that cost the jobs of two Supreme Court justices, a member of the former governor’s cabinet and a member of the state board of probation and parole.

At a time when law enforcement, prosecutors and the justice system are being challenged, Kane’s “public service” debacle has done nothing to help. Kane was preoccupied with her own political survival. She lacked credibility to be a force in law enforcement reform, rooting out corruption or building stronger ties to the community for prosecutors and the court system.

That was a cautionary lesson in itself, but to underline the poiny, Kane’s first deputy (and her appointed replacement) Bruce L. Castor Jr., said at a press conference that some of the mess Kane left behind won’t be so easily wiped away. He said his first objective as attorney general will be regaining the trust of the public, which he acknowledged was ­damaged by Kane’s tumultuous tenure.

Kane leaves office with a whimper. Although her lawyer suggests she may appeal, her resignation is the beginning of the end of an ugly period in Pennsylvania politics.

We would do well to keep that ugly chapter in mind when we think about our national leadership in the months ahead.

Matthew T. Mangino

Matthew T. Mangino, the former district attorney of Lawrence County, Pennsylvania is of counsel with Luxenberg, Garbett, Kelly & George P.C. His book The Executioner’s Toll, 2010 was released by McFarland Publishing. You can reach him at www.mattmangino.com and follow him on Twitter @MatthewTMangino). Readers’ comments are welcome.

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]]>https://thecrimereport.org/2016/08/19/pennsylvanias-shakespearean-tragedy/feed/1PA AG Quitting After Perjury, Obstruction Convictionshttps://thecrimereport.org/2016/08/16/pa-ag-convicted-of-perjury-obstruction-in-vendetta/
https://thecrimereport.org/2016/08/16/pa-ag-convicted-of-perjury-obstruction-in-vendetta/#respondTue, 16 Aug 2016 11:58:39 +0000https://livesite.qdoznr1-liquidwebsites.com/?p=49482Pennsylvania Attorney General Kathleen Kane is resigning her position after her conviction for perjury, obstruction, and other crimes in an illegal vendetta against an enemy, reports the Pittsburgh Post-Gazette. Four years after her landslide election as the first female attorney general, a jury of six men and six women found her guilty of all charges. Kane, 50, a Democrat, will be sentenced on Oct. 24. She was not seeking another four-year term.

Gov. Tom Wolf called the conviction “a sad day for the commonwealth.” Vying for the attorney general’s job in the November election are Josh Shapiro, a former Democratic state legislator, and Republican State Sen. John Rafferty of Montgomery County. Prosecutor Kevin Steele convinced jurors that she orchestrated the illegal leak of secret grand jury documents to plant a 2014 story critical of her nemesis, former state prosecutor Frank Fina. Ms. Kane then lied about her actions under oath, the jury found. Her lawyer, Gerald Shargel, vowed to appeal.